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Understanding Frexit: Investors are Worried about French Exit from EU

The chances of France leaving the European Union are quite low at the moment. But, the popularity of far-right National Front leader Marine Le Pen in France has been rising gradually and this is giving jitters to investors globally. Marine Le Pen has pledged that she will propose some important changes to the European Union leaders and if they don’t agree, she will look forward to French exit from the European Union.

Many people have declined the chances of France leaving the European Union. However, most of the economists and political experts were putting their bets against Brexit. Most of the political surveys were suggesting the Hillary Clinton would be the next U.S. President. But, the reality was different. We are living in fast changing world. People’s opinions are changing fast. Uncertainty has become new normal.

In France, Le Pen was behind Francois Fillon in the poll surveys. Recent scandals involving Fillon paying his wife from public funds have reduced his popularity and made Le Pen as frontrunner in French presidential elections.

If France exits European Union, the bloc will face major troubles. French economy is strong and it has been one of the biggest partners in European Region. Euro and European Union have faced Brexit in a bold manner. But, France exiting the European Union won’t be easy for European countries.

The problem is the rise of nationalism in France. The problem is the refugee crisis all over Europe. The problem is the indifference of main European leaders to the problems faced by European citizens on day-to-day basis in dealing with influx of refugees. European people and leaders might want to do a lot for refugees but they don’t have resources. It is not easy to deal with such massive influx of people without knowledge of language, customs and traditions. Most of refugees have been termed as economic migrants who have become a major burden for many European countries.

In a recent research note, Fiona Cincotta, market analyst City Index said, “The French presidential candidate, Le Pen, has managed to create a stir since putting herself forward and vocalizing her desire for a Frexit.”

Market analysts start talking about possibilities and situations even when they are too remote. But, with changing times and changing preferences of voters, investors have to be careful.

During the first round of French presidential elections, Le Pen is expected to win (or come second) as per current surveys. This will be clear by April 23. In the second round, Le Pen would face her opponent and that would be decided on May 7 by French voters. Political analysts suggest that Le Pen has high possibilities of clearing the first round but in the second round, she won’t be able to get majority support from French voters.

Center-left candidate Emmanuel Macron might give a tough fight to Le Pen in the second round. Political experts are betting on Macron getting nearly 65 percent of support from French voters.

Most Pro-European Union leaders would like to see Macron rising in the French elections. Investors would also prefer to see France remaining in European Union. But, in case France exits the bloc, it can trigger more such exit votes in the coming years.